World of Beer (WOB), a chain of craft beer restaurants, filed a motion today (6 August) for a proposed debtor-in-possession (DIP) loan that includes an initial advance of up to USD 500,000 and a maximum facility totaling USD 2m.

The DIP loan would be provided by an unnamed entity controlled by WOB president and CEO  Paul Avery, according to the motion filed in the US Bankruptcy Court for the Middle District of Florida.

According to the motion, the DIP features an interest rate of 12.5% per annum, with a 3% origination fee due at closing based on the maximum facility amount. Funds would be allocated to cover working capital needs, administrative costs, payroll, supplier payments and other essential business expenses. The loan terms also stipulate that any funds drawn are on a non-revolving basis, and amounts repaid cannot be reborrowed.

WOB said the DIP loan is the most favorable financing option available, having been unable to secure unsecured credit from other lenders on better terms. The company said it engaged in extensive negotiations over the past six months, exploring various financing alternatives. However, no outside lender has been willing to extend credit under conditions as advantageous as those offered by the DIP lender, the motion said. Without the funding, WOB said it could face potential liquidation.

WOB filed for Chapter 11 on 2 August, citing a contentious relationship with franchisees over a new store model, resulting in costly litigation and lost royalties. The pandemic worsened their situation, the company said, leading to an USD 8m loan for new locations that ultimately closed in a poor operating environment. Mounting lease expenses, litigation costs and bank debt forced WOB to shut down a dozen locations, with debts exceeding assets, necessitating the bankruptcy to close underperforming stores and reorganize.